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We all know the R/E market is quite UGLY,and your post is well thought out .....BUT what AREA of the country are you referring to be able to buy TWO $120k house in cash at this time?

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Well I wouldn't necessarily buy them both at the same exact time, I was just throwing out an idea of something i'd want to do. But the area I was interested in was Austin Texas since I plan to be moving there in the future and would want a house to live in as well as for investing. I would be fine with just getting 1 house though obviously until learning more about it.

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It'll be really hard to get 2 loans in your situation (assuming it's similar to mine in that you are ~22 and haven't previously owned a house). I don't think you should put down 100%, but that would make it easier to get 2 houses obviously. Another problem is that if you have a house as investment property the interest rates are higher.

If you don't have much credit, you'll probably have to put down 20% or so minimum, but after a few months of making your payments on time your credit will go way up (so I've heard, I'm just making my first payment in a few days and I have almost no credit).

There are also a ton of things you have to do when you buy a house, so I recommend getting one then waiting a couple months to get the 2nd one. The banks will also try to screw you with the loan, so much so that it took ~2-3 hours a day of talking to the bank, real estate agent, etc. It's a huge pain.

The one thing you have to do though is get 2 banks competing against each other (ignore them when they say to not have other banks pull your credit, they are just trying to eliminate competition). When they send you a good faith estimate for your loan, send it to the other bank and they will beat it, then send that to the original, etc. etc. On our first house we were offered ~7.5% interest putting 20% down, then when we made them bid against each other we got it down to 5.8%, saving us a ton.


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Hey man thanks for the response. Yeah my situation is pretty much identical, i'm 22 years old and never have built up any good credit which is why I was told it might be better to just buy the house outright instead of get hit with alot of interest. Do they just differentiate between a house thats for investment purposes by simply are you living in it yourself or not?

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The main decision as far as paying cash or taking out a mortgage relates to mortgage rates, and what kind of a return you can get investing money in a fairly conservative manner. Right now a 30 fixed mortgage is about 5.9%, and the mortgage interest is deductable so you'll probably get back about a third of it when you file your income taxes. The end result is that your mortgage rate is really about (.66)(5.9) or about 3.9%.

Let's say you have $120,000 cash and are looking at a $120,000 house. You'd be better off putting 20% down, taking a mortgage, and investing the remainder because the cash that you invest, even if you're very conservative with it, will grow at greater than your mortgage rate. Now, if mortgage rates were say 12%, like they were when my parents bought their first home, then buying the house for cash would make a lot more sense.

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But in my situation would I really be getting 3.9% in interest? My credit isn't good yet.

Also i'm not sure how relevent it is, but the way I would like for it to work out is I would like to basically buy a house to live in for 2-3 years and a house to just own for 2-3 years (investment) in Austin, then after that time I think i'd probably want to move somewhere else and was hoping that within that 2-3 years the housing market would go back up and I could sell at a profit. Not sure how likely/realistic this is since I haven't really began my research yet. If I moved there and then the housing market didn't improve or went down then i'd be pretty disappointed about that.